Australians spend $1.5 billion more than they need to each year on mobile phone bills, something new rules aim to prevent by ensuring plans are worded more clearly, that the word "cap" is avoided, and that consumers are warned before they go over their data limit.

This ACMA chart show's a timeline of when new rules in the code will be implemented.

The ACMA warned earlier this year that it was prepared to reject the industry-drafted code and install its own standard, if the code was too lenient. But today it agreed to register it, written over two years of "tense, tough battle" between industry, consumer groups and the regulator.

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"[We] are hopeful that its adoption will result in clearer advertising, easier comparison of products, better information about contracts and better tools to help consumers avoid bill shock," said Teresa Corbin, CEO of the Australian Communications Consumer Action Network (ACCAN), which proposed the code.

A public inquiry conducted by the ACMA estimated that collectively Australian consumers spend $1.5 billion more than they have to every year because they choose the wrong mobile plan. Telcos and their customers spend a further $108 million resolving complaints, while telcos write off up to $113 million annually in bad debts incurred through bill shock.

Accompanies story on changes to telco laws, July 12, 2012

Under the new 102-page code, which will be enforced by the ACMA from September 1 this year and progressively phased in over the next two years, customers will receive warning messages when they have reached 50 per cent, 85 per cent and 100 per cent of their monthly allowance for calls, messages and data.

But there's a catch: telco's data notification warnings won't have to be sent in real-time and could be received by customers up to 48 hours after reaching a certain limit, apparently due to some telco's billing systems being incapable of alerting customers of their usage in real-time.

Kath Silleri, an ACMA spokeswoman, said requiring all telcos to make available real-time information regarding customer accounts was something she would like to see implemented by all telcos but stopped short of saying the ACMA would enforce it.

"Look, we think that the notification at 85 per cent should give most people the opportunity to modify their behaviour so as not to experience unexpected bill shock," she said.

"Clearly the notification at 100 [per cent] being 48 hours delayed could result in people spending more than they had anticipated but given the current technical requirements - and the span of the industry - we considered 48 hours as appropriate..."

A timeline of the phasing in of certain parts of the code shows that larger telcos will have until September 2013 to ensure "spend management alerts" (i.e. data, call and message notification warnings) are sent to customers in a prompt manner, while smaller telcos have until September 2014.

Misleading terms like "cap" banned

As well as data notification usage warnings being enforced, the use of the term "cap" will be banned unless plans have a definitive limit that cannot be exceeded, and other potentially misleading terms will be more tightly controlled.

Telcos will also be required to offer customers a "Critical Information Summary", which details pricing and minimum spend information across all products in a standardised format. Most advertisements will have to include the cost of a two-minute national call, a standard SMS and 1MB of data.

"The code will apply to every service provider in Australia," said ACMA chairman Chris Chapman. "Compliance with the code is no longer an option."

A new compliance monitoring body named Communications Compliance, headed by Ms Deirdre Mason, a former Telstra executive and director of the Telecommunications Industry Ombudsman, has been established to monitor companies and refer breaches of the code to the ACMA. Ms Mason will be joined by a former federal Communications Minister, Michael Lee. A third director nominated by consumer groups will soon join the board.

The ACMA, unlike the Australian Competition and Consumer Commission, can issue directions to telcos to comply with the new code, but cannot actually fine or penalise providers for not adhering to it - though it can still take them to the Federal Court, an option that was not available under the existing code.

Similarly, Communications Compliance will require non-compliant telcos to submit an "action plan" outlining how they will better perform, but no fines or penalties will be issued.

ACCAN expressed concerns that customer service problems would continue unless the ACMA was given more power to enforce the code.

"[The] ACMA does not at present have strong enough powers to enforce the code," said Ms Corbin. "Enforcement powers are essential in getting industry compliance."

But Corbin said the code was much better than ever before and could stimulate growth in the telco sector.

"Informed consumers are good consumers. At this point in time consumers live in terror of big bills and live in terror of being caught in a long term contract," Ms Corbin said.

The network said it would release a guide to the new code, highlighting key points and consumers' rights. It has also written to the Communications Minister, Senator Stephen Conroy, asking him to increase ACMA's disciplinary powers.

Resisting change

The telco industry initially resisted change but the regulator made it clear it was not going to "roll over", AMCA chair Chris Chapman said.

"My own discussions with the chief executives of the major telcos have convinced me that they get it. I think they know that in this increasingly technology driven environment ... there is only one outcome for them — that is to change their business practices and own their customer in a way that is materially rewarding," he said.

The new code fulfills about 95 per cent of the ACMA’s wish-list of improvements, Ms Silleri said. The remaining five per cent was for volumetric pricing on advertising — but which will be included on individual offers — and real-time spend information.

The ACMA launched a national inquiry into consumer protection in 2010 after a record number of complaints were made to the industry ombudsman. It used evidence gathered from this inquiry to pressure the industry into meeting its recommendations, Ms Silleri said.

143 comments

I don't understand why the word 'cap' needs to be removed, because it clearly states that the most you will pay is (for example) $49, which includes $400 calls and 1Gb data. Any logical person would know that if you use more than $400 in calls and 1Gb in data, you will incur additional charges. Those who don't read or understand their contract properly, wrongly assume that you can spend as much as you want, download as much as you want and all you'll pay is the $49. Unless is states the words "unlimited", you don't assume it is unlimited. People just need to read their contract details properly and this will avoid all confusion.

In addition, for smartphone users, there are a multitude of usage apps which can monitor your call/sms/data usage every half an hour if you so choose to. I have mine updating on the hour so I never have 'bill shock'. My provider also sends me an SMS when I reach 80% of my data.

International roaming charges need to be looked at though!

Commenter

Cabbotage

Location

Sydney, NSW

Date and time

July 11, 2012, 11:54AM

Because when 'cap' is used as a verb it means a maximum limit. That implies that you cannot go over the advertised amount. In fact it is exactly the opposite for mobile 'caps' where it is in fact a minimum spend. People should not have to read the fine print. The fact they have got away with it for so long reflects very poorly on the telcos and the authority.

Commenter

Tim

Location

South Yarra

Date and time

July 11, 2012, 12:23PM

Then you don't understand the definition of a cap. If they want to advertise a cap then the price would be capped at the price they advertise.

As it is, they are advertising a service for a price, and calling it a cap, which is simply deceiving.

A true cap would be like how the ISPs do it - once you reach the limit your service is either reduced or cut off.

Commenter

CAP

Date and time

July 11, 2012, 12:24PM

"I don't understand why the word 'cap' needs to be removed, because it clearly states that the most you will pay is (for example) $49"

If you understood what the word 'cap' means, you would have your answer.

Commenter

DD

Date and time

July 11, 2012, 12:24PM

If that's the case , then I would want real time reporting on my usage.

I got stung $800 for 1800 numbers with Telstra (free calls aren't free on my plan for some reason) even though the plan was advertised as 'unlimited calls and texts'

There needs to be more regulation.

Or , we could start seeing "1 MILLION DOLLAR CAP" - 'calls charged at $5000 per minute'

We shouldn't have to do so much maths to work out a commodity product.

Commenter

Double Pi

Location

Sydney

Date and time

July 11, 2012, 12:25PM

Because it's not a CAP - that's the point. A $49 plan is not CAPPED. It includes a certain value of calls and data - not a CAP.

That's the point!

Commenter

der

Date and time

July 11, 2012, 12:25PM

Because nothing is 'capped'; there is no limit to your monthly spend. In fact, these plans are more like a 'floor', as your spend can't go below a certain level. You will also notice that the call rates of these 'cap plans' are much higher than non-cap plans. Of course it's all in the contract but it still doesn't stop the name from being misleading advertising.

Commenter

Michael Westcott

Location

China

Date and time

July 11, 2012, 12:30PM

The word "cap" is most misleading as it implies that is the maximum you pay, however as you mention it is not. What should be shown is you pay so much for the value of services as a minimum payment. It is tiresom to compare "Caps" from different providers as the cost per minute or MB varies so you can't compare. A proper "Cap" should be for unlimited use, but I can't see this being introduced for less than $100+ a month.

Commenter

Broomie

Location

perth

Date and time

July 11, 2012, 12:31PM

Whilst you are correct in that people should read their contracts, in most usage "cap" means that you costs can be less than the stated amount or the stated amount but not more. Thus my health insurance caps my out of pocket costs at $x and I know I will not pay more that that. Whereas in all these plans it is actually the MINIMUM cost that is being quoted!

Commenter

MrDog

Date and time

July 11, 2012, 12:32PM

"I don't understand why the word 'cap' needs to be removed, because it clearly states that the most you will pay is (for example) $49"

$49 is the LEAST you will pay, not the most.

"Cap" implies an upper limit, a maximum. That's what it's meant for hundreds of years.